2006 Luxottica accounts match expectations
Luxottica's 2006 accounts match expectations. However, while Lehman Brothers maintains that the group's title of world leader of the eyewear sector is still in the running, Goldman Sachs is being more prudent until he has a clearer picture of 2007.
Firstly, the results. Revenues in the last quarter were 1.1 billion euros, a 6.8% increase, whereas 2006 showed a growth by 13% to 4.67 billion euros (3.2 billion in retail, an increase of 7.6%, and 1.7 billion in wholesale, +30.5%).
Specifically, the company underscored that the overall billings for Ray-Ban, the world's best-known eyewear brand, had two-figure growth and crossed the sales threshold of 14 million pairs. Luxury brands (including Bulgari, Chanel, Dolce & Gabbana, Prada and Versace) also sold well, with growth of 40%. Geographically-speaking, the company stated that it was pleased with the trend in North America and in emerging markets. Throughout the year, a total of 570 new stores were opened and 510 were renovated.
As far as 2007 is concerned, the group is aiming 'at further significant growth in retail and wholesale'. In particular, the action plan should envisage investments of 225 million euros in group stores, the restructuring of 480 and the addition of over 500 outlets. The group also said that it intends to increasingly focus on emerging markets.
Lehman Brothers analysts, who changed their opinion from neutral to overweight, believe that 'the current price of shares does not fully mirror the group's growth prospects'. According to them, it does not have rivals in terms of a business model that combines fashion, luxury, optical products, production and distribution.
Lehman Brothers said that the company has profit growth potential of 19% this year and 15% in 2008, which would mean a share price/profit ratio (p/e) of 21.3x and 18,6x, respectively. 'Given the company's growth ratio', analysts write, 'we think Luxottica should have more aggressive multiples'.
The analysts at the US investment bank also maintain that there is a very lucrative business still to be exploited: lens finishing. For all these reasons, the share price target has risen from 25 to 27 euros, with a potential upturn in margin of 13% compared to current prices.
As already stated, Goldman Sachs is more cautious and continue to have a neutral opinion, with a price objective of 26 euros. In their report, the analysts wrote 'Despite the strong sales results, in wholesale especially, we do not think that the shares will change significantly given that the figures are in line with market expectations'. And added: 'We believe that for the 2007 outlook investors will expect to see greater visibility'. In short, they are waiting for the company's estimates on the current financial year, which will be announced March 5.
